WWRR Vol.2.015

More documents

Recommendations

Info

2019 Global Economic and Market Outlook o We think it unlikely that an additional 50 basis points will bring the house down. Chinese growth is likely to slow by a further 30 basis points to 6.2% over the year to Q4 2019 (a similar slowdown to that seen in 2018). We note that much of the moderation in 2018 was driven by domestic policy (“deleveraging”) and with policy now supporting growth, we think it is unlikely that the tariffs (at least on current plans) will force a faster deceleration. Eurozone growth is likely to broadly stabilise, following the unexpectedly sharp slowdown over 2018. We expect GDP to grow by around 1½% in the year to Q4 2019, and while the risks are probably to the downside, we suspect that just as the market was interpolating strong growth at the beginning of this year, they risk overstating the likely weakness as we move into 2019. Market outlook As mentioned above, we expect the Fed to increase the Fed funds rate by 25 basis points later this month and then a further 75 to 100 basis points in 2019 (see page 41). While the ECB is likely to end QE in December, we do not expect a rate hike until Q1 2020 (see page 44). The BoJ is likely to keep policy very accommodative, but it is possible that they modestly widen their 10-year yield target band in Q2 (see page 28) Long rates in the US and Europe are likely to drift higher over the course of the year, with the US 10-year approaching 3¾% by end year, and the German 10-year to 1¼%. Japanese long rates will remain under the control of the BoJ (see page 46). The US dollar should remain supported in H1, but we expect it to peak and then decline a little in H2 as US growth catches down to the rest of the world and the market begins to focus on the end of Fed tightening and a possible ECB hike (see page 47). Metals and bulk commodity prices to remain mixed, with base metals outperforming the bulks (see page 53). Global equity prices are likely remain choppy for much of the year, but to end 2019 modestly higher (see page 57). Risks Notwithstanding our optimistic near-term view, as 2019 progresses, the challenges are likely to continue to build. While we do not expect the trade war to significantly slow growth in the near term – it is already 5 months since the first significant tariffs were introduced – we do not expect a quick resolution, with the risk that President Trump continues to increase the stakes as the year progresses. As we highlight in the essay “Trade war 2019”, this is where we believe the real risk lies, with threatened tariffs (including those on autos and the remainder of imports from China) much larger than those currently implemented or pending. Similarly, while we expect a near-term resolution to Brexit sometime in Q1 (see page 15), this is unlikely to stem the internal conflict in the not so “United” Kingdom. While the UK’s share of the global economy is relatively small, if the large recession that the Bank of England predicts under a hard Brexit scenario were to occur, it would have a material impact on markets and global growth. The essays that follow explore some of the key themes and risks that underpin this outlook, and are followed by a summary of the economic outlook for each of the major economies, as well as an overview of our outlook for the various markets we cover. We thank you, our readers and clients, for the business relationships we share and wish you great success in finishing 2018 and mapping your strategies for 2019. 4 December 2018 5
2019 Global Economic and Market Outlook Topical essays Topical essays Trade war 2019: An updated assessment 7 US recession 2020: Not as certain as some think 11 Brexit and all that jazz 15 Stagflation 2020: Are we understimating US inflation risks? 16 China: All eyes on property again 20 Equities and yields: Can equities cope with higher interest rates? 23 The end of global QE: Keep calm and carry on 27 Higher US rates and EM: How many countries are swimming naked? 31 Australian housing: A necessary correction but risks attached 36 4 December 2018 6
Page 1 and 2: 07 th December 2018 What We Are Rea
Page 3 and 4: Prudent Policy Mix Is the Anchor of
Page 5 and 6: Steady Growth Expected in F2020 We
Page 7 and 8: Exhibit 9: Cyclical Component of In
Page 9 and 10: Exhibit 15: Saving Less Investment
Page 11 and 12: Risks: Skewed to the Downside, Main
Page 13 and 14: 2019 Global Economic and Market Out
Page 15: 2019 Global Economic and Market Out
Page 31 and 32: Sep-09 Sep-10 Sep-11 Sep-12 Sep-13
Page 33 and 34: Oct-08 Oct-09 Oct-10 Oct-11 Oct-12
Page 47 and 48: MNovember 21, 2018 08:05 PM GMT FOU
Page 49 and 50: M Story in Charts FOUNDATION Exhibi
Page 51 and 52: M FOUNDATION Free home delivery is
Page 53 and 54: M FOUNDATION This may have longer-t
Page 55 and 56: M FOUNDATION ...with an epic >US$0.
Page 57 and 58: M FOUNDATION Grocery models will ev
Page 59 and 60: M FOUNDATION Food for Thought Consu
Page 61 and 62: M FOUNDATION ..and key to success i
Page 63 and 64: M FOUNDATION Exhibit 18: Path to pr
Page 65 and 66: M Exhibit 20: Gross margin for groc
Page 67 and 68:
M FOUNDATION Exhibit 23: Adoption o
Page 69 and 70:
M Retail Model #3: The Hybrid Model
Page 71 and 72:
M FOUNDATION Orders generated on th
Page 73 and 74:
Agri-inputs / Automobiles India UDA
Page 75 and 76:
Agri-inputs / Automobiles India BAS
Page 77 and 78:
12/5/2018 From India to US Election
Page 79 and 80:
Page 81 and 82:
Page 83 and 84:
Thursday, 22 November 2018 Page 1 F
Page 85 and 86:
Christopher Wood christopher.wood@c
Page 87 and 88:
Page 89 and 90:
Page 91 and 92:
Page 93 and 94:
Page 95 and 96:
12/5/2018 Why You Would Not Have In
Page 97 and 98:
Thursday, 29 November 2018 Page 1 F
Page 99 and 100:
Page 101 and 102:
Page 103 and 104:
Page 105:
India Economics “Strong growth to
show all

WWRR Vol.2.015

Create successful ePaper yourself

Delete template?

Save as template?